Sky (UK)

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Sky is the UK's foremost pay TV service and was the world's first satellite broadcasting business when it was launched by Rupert Murdoch's News Corporation in 1989. After a very shaky start, British Sky Broadcasting (or BSkyB) eventually established itself as one of the country's most profitable broadcasters, buying up rights to many of the UK's biggest sporting events. Almost a decade after its launch the service became the UK's first digital broadcaster, and now delivers more than 500 audio and video channels direct to around a third of all UK households. It has also diversified into broadband, telecoms and even (briefly) a music download service. In 2009, it was named as Britain's Most Admired Company by business magazine Management Today. Following the break-up of News Corporation in 2013, Sky's largest shareholder is now Twenty-First Century Fox with a 39% stake. In 2014, the company acquired control of Fox's separate Sky-branded satellite broadcast subsidiaries in Italy and Germany to create a single Sky Europe entity. Two years later, Fox issued a new offer to take full control of the enlarged Sky business. That deal is still awaiting clearance in the UK; intense opposition to the Murdoch empire in some political and media circles means that approval is by no means certain.

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Sky website

Brands

Sky1 Nick TV
Sky Sports Comedy Central
At The Races SkyBet
Sky News The History Channel
Sky Songs National Geographic Channel
Sky Movies Sky Arts

Parent

Twenty-First Century Fox

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 15th Sep 2017: The bid by 21st Century Fox to take full control of UK satellite broadcaster Sky faces another hurdle after Culture Secretary Karen Bradley referred the purchase to the Competition & Markets Authority for further investigation. She cited concerns over "media plurality and genuine commitment to broadcasting standards". The issue of media plurality was anticipated, but the latter point is thought to be a dig at a series of recent harassment and diversity scandals at Fox News in the US. Any concerns on this front have already been dismissed by independent regulator Ofcom, but the attempt by the Murdoch family to take full control of Sky has long been a political football in the UK. Bradley is either seeking an excuse to veto the bid, or wishes to accumulate sufficient expert opinion to defuse any likely uproar over an eventual approval. In a speech to the Royal Television Society two days later, Fox CEO James Murdoch warned that his proposed takeover of Sky was a test for the government to show whether or not the UK will truly be "open for business" in a post-Brexit environment. The purchase of Sky in Germany and Italy has already been approved by their respective regulators.

Adbrands Weekly Update 3rd Aug 2017: European satellite broadcaster Sky reported solid growth in revenues for its latest year to June, but profits were dented by rocketing sports rights costs, and subscriber growth was below estimates as a result of fierce competition from streaming services. Combined revenues rose by 8% to £12.92bn, helped slightly by exchange rates. Growth at constant rates was 5%. UK & Ireland is still the biggest business by far, but revenues were up only 3% to £8.60bn. Italy contributed £2.46bn (up 18%, including currency gains) and Germany & Austria £1.86bn (up 23%). However, the domestic business still generated close to 90% of operating profits. Group net income edged up by 4% to £691m. Operating profits were actually down year-on-year because of the steep increase in programming costs, which jumped by around £1bn for the second consecutive year to a whopping £6.2bn.

Adbrands Weekly Update 13th Apr 2017: EU regulators cleared 21st Century Fox's proposed acquisition of the shares it doesn't already own in pan-regional satellite broadcaster Sky. However, no decision has yet been reached by regulators in the UK. That is likely to prove a harder sell, given the historical animosity between the Murdoch clan and large parts of the UK's political community.

Adbrands Weekly Update 23rd Mar 2017: The UK Government referred 21st Century Fox's proposed takeover of its part-owned subsidiary Sky to regulators. Media watchdog Ofcom has been tasked with deciding whether full ownership of Sky would give Fox too much political influence in the UK. A decision is expected mid-May. An earlier attempt by the Murdoch family to take control of Sky through what was then News Corporation prompted substantial opposition from politicians and rival media outlets. It was eventually abandoned when News Corp became embroiled in the phone hacking scandal. Since then, the Murdochs argue, the structure of the global media industry has changed dramatically, not least as a result of the increasing dominance of Google and Facebook. Meanwhile, the old News Corp has been split in two, so Sky would be entirely separate from the original group's newspaper publishing interests. However, both would still ultimately be controlled by the Murdochs.

Adbrands Weekly Update 28th Jul 2016: European satellite broadcaster Sky reported solid progress for the year ended June. Continuing revenues were up 6% to just under £12.0bn. However, without the exceptional gains reported in the previous year from disposals, net profit plunged by two-thirds to £663m. The year to 2015 had included big profits from the sale of the Sky Bet gambling services and various other investments. Excluding these and other items, operating profits edged up 1%. The core UK & Ireland service remains the motor of the business, contributing 70% of revenues and virtually all profits. However, operations in Germany & Austria and Italy showed solid progress. The group had 21.8m retail customers by the end of the year, including 12.4 in the UK & Ireland.

Adbrands Weekly Update 16th Jun 2016: It's all about the football. Satellite broadcaster Sky retained its dominance of Germany's Bundesliga premier division, securing a new four-year rights deal for a record E4.6bn, an increase of around 85% on the current deal agreed in 2012. However, local regulators ruled last year that no one broadcaster can have complete control of live rights - as Sky has had - so the Murdoch-controlled group was forced to surrender a package of 40 matches per season to Discovery's Eurosport channel.


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Background

Free for all users | see full profile for current activities: Rupert Murdoch's business career has been punctuated by a series of audacious gambles, and Sky was certainly one of the biggest. By the end of the 1980s, Murdoch already had considerable experience of the television business, originally in Australia, then as one of the early investors in the UK's London Weekend Television during the 1970s. [See News Corporation profile]. However the acquisition of Times Newspapers in 1981, added to News of the World and The Sun which he already owned, effectively barred him from playing any further role in UK television. Government regulation prevented newspaper publishers with more than 20% market share from controlling a terrestrial broadcaster. 

These regulations did not apply to companies broadcasting via new satellite technology instead of the existing terrestrial transmitter network. Murdoch took one of the biggest risks of his career to launch his own satellite television station, broadcasting 24 hours a day nationally to the UK. His plan was to offer four channels initially, two offering free entertainment and news, the other two providing movies and sports for a subscription fee. The consensus of opinion within the UK media was that the gamble stood a very high chance of failing. Most observers were convinced that the viewing audience would never choose to pay for television programmes when there were already four strong channels available to them for free. In addition, viewers were obliged to install a new satellite dish in addition to their existing terrestrial aerial. Sharpening the challenge was the arrival of a competitor, BSB, which planned a similar selection of services. BSB was effectively endorsed by the IBA, the UK's broadcasting authority, whereas Sky was generally perceived by the media establishment as an upstart and an outsider.

The factor even Murdoch had not taken into account was the arrival of a severe economic recession shortly after both Sky and BSB launched in 1989 and 1990 respectively. As interest rates rose, both companies began to suffer as the cost of servicing their huge debts spiralled. Worse still, initial public response to satellite television proved lukewarm at best, proving the sceptics right. As a result of the tiny viewing audiences, advertisers too were slow to take the leap. The future of Sky TV, and even of News Corporation itself, was beginning to look very bleak indeed. Luckily for Sky, BSB was the first to crack. Sky took over its competitor in 1990 to become BSkyB. But this only increased the group's costs - the company was reported to be losing £14m a week by the end of that year.

Two things saved Sky. The first was tough new chief executive Sam Chisolm, who cut costs mercilessly, renegotiating contracts to buy programmes cheaper. The second was a bold all-or-nothing deal in 1992 to secure exclusive live broadcasts of Premier League football matches, outbidding terrestrial broadcasters BBC and ITV. Adding to the company's good fortune, the increasing take-up of cable television which also supplied Sky programming into UK homes caused audiences to grow rapidly in 1992 and 1993. 

By 1994, Sky's offering had grown from four channels to almost 20, some branded to Sky, the others joint ventures with US partners. BSkyB floated that year, then Britain's biggest non-privatisation float. The company used part of the proceeds to back a buying spree in the UK sports industry. BSkyB quickly built up a strong portfolio of exclusive sporting broadcast rights, including the dominant position in UK televised football, cricket and rugby, in a series of high price deals. One of the biggest was a £670m deal in 1996 to secure viewing rights for Premier League football for five years.

In order to bolster the output of its sports channels, BSkyB tried to buy UK soccer giants Manchester United for $1bn in 1998. But the deal was subsequently vetoed by regulators. Instead, the company signed strategic alliances with other key football clubs including Chelsea, Leeds United and Sunderland as well as Manchester United, taking small equity stakes and securing media rights. Also in 1998, the group launched the first digital broadcast service in the UK, Sky Digital, and announced plans to switch off its analogue signal by 2002. 

Between 1996 and 1998 Rupert Murdoch attempted to spread his net across Europe as well, forging partnerships with pay TV operators in France, Italy and Germany. In 1997, France's Canal+ acquired a 17% stake in BSkyB in anticipation of a more wide-ranging alliance, but regulatory obstacles and negative French press subsequently got in the way of a deal. Utilities and media conglomerate Vivendi became the ultimate parent of Canal+ in 1998, and began to press for a new deal in 1999. The French group acquired further stakes from other BSkyB shareholders and attempted to broker a merger of Canal+ and BSkyB, but with little success. In Germany, BSkyB acquired a significant stake in Germany's KirchPayTV.

In early 2000, News Corporation announced plans to spin off all of its global satellite television interests in a new business, to be named Sky Global Networks. This entity was intended to take over News Corp's 40% stake in BSkyB as well as its interests in Hong Kong's Star TV and minority stakes in Japan Sky Broadcasting, Sky Latin America, Germany's Premiere, Italy's Stream and Foxtel in Australia. The announcement led to a series of feverish negotiations as both Vivendi and Kirch attempted to add their own broadcast interests into what was expected to be the world's biggest media IPO, set for 2000 or 2001. Vivendi proved particularly aggressive in the negotiations, especially after its own acquisition of Seagram's Universal Entertainment businesses.

In 2001, another general economic downturn and especially a fall in advertising revenues, forced News Corporation to revise its plans for Sky Global Networks. At the same time, the group became embroiled in a long and seemingly fruitless series of negotiations to crown its plans with the purchase of US satellite broadcaster DirecTV. By 2002 financial problems at both Vivendi and Kirch further complicated the Sky Global concept, which was effectively put on hold. However Sky itself continued to perform strongly, hitting its anticipated target of 5m subscribers in 2001, and shutting down its analogue signal early to become a digital-only broadcaster. The group launched its Sky+ Personal Television Recorder at the end of the year as a rival to TiVo. In 2002, another rival broadcaster ITV Digital (originally launched as OnDigital) collapsed under the weight of its massive debts, leaving Sky once again the only serious player in the digital market.

As ITV also struggled with falling advertising revenues and audience shares, Sky pressed ahead with new expansion plans. In 2002 the group scored a major coup in capturing highly regarded Dawn Airey as managing director, Sky Networks, and revealed plans to sharply increase spending on "original content". (Airey left the company in 2007). The group continued to extend its hold on sports coverage in 2003, agreeing a further three-year package for exclusive live rights to all Premier League football matches from 2004 until 2006, at a cost of £1bn. However this led to growing conflict with European regulators who forced the group to sub-license some matches to terrestrial UK broadcasters. The EC also ruled that the Premier League must sell rights to more than one broadcaster after 2006. Later in the year, chief executive Tony Ball, the successor to Sam Chisholm, and widely credited for the successful transformation of Sky into Europe's most profitable pay-TV business, announced he would step down from the company in 2004 at the end of his contract. Despite considerable protest from shareholders and unions, Rupert Murdoch's son James was confirmed as Ball's replacement. In a bid to appease protestors, Rupert Murdoch announced he would remain chairman, but would appoint Lord Rothschild as an "impartial" deputy chairman. 

In November 2006, BSkyB effectively blocked an attempt by cable group Virgin Media (formerly NTL Telewest) to acquire the UK's free-to-air commercial broadcaster ITV by acquiring an 18% shareholding in the latter for around £940m. BSkyB is prevented from owning more than 20% of ITV by cross-media ownership regulations, but the stake gave Rupert Murdoch a significant voice in the future development of terrestrial broadcasting in Britain. Virgin launched an outspoken attack on BSkyB's tactics and called for a regulatory investigation of the purchase. This led to an increasingly bitter war of words between the two companies, which reached new levels when BSkyB sought to renegotiate its arrangement with Virgin Media over carriage of its free-to-air cable channels. Sky's attempts to raise the wholesale price of its service was rejected by Virgin, and when the two sides failed to reach a compromise, Sky switched off supply of the channels in Spring 2007. A savage PR battle ensued, with both sides launching marketing campaigns to criticise the other. see full profile for current activities


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